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Judgment
D.N. Baruah, J.—This appeal is directed against the Judgment and decree dated 23.2.1976 passed by the Subordinate Judge-II, Manipur, in Original (Money) Suit No. 114/73/10/74/13/74, dismissing the suit against the first Defendant.
A brief narration of the facts leading to the present appeal are as follows:
The Appellant (Plaintiff) is one of the Scheduled Banks engaged in banking business in different parts of the country. It has a Branch at Imphal, Manipur. The first Defendant (second Respondent) approached the Appellant for a loan under "the Small Business Finance Scheme" for improvement of his business.
The Appellant bank agreed to accommodate the said second Respondent to the extent of Rs. 25,000/- as per the terms and conditions of the Bank.
On 20.3.70, the second Respondent executed an agreement for cash credit convenenting that he would open a Cash Credit Account with the Appellant (Plaintiff) and he would draw money by cheques through such Cash Credit Account and would not require advance more than Rs. 25,000/-. He also agreed to repay the loan with interest at the rate mentioned in the agreement. The rate of interest prevalent at the time of execution of the agreement was 12% per annum.
The second Respondent brought the first Respondent on the same day to stand as a guarantor for his due repayment. He also executed a Pro-note in favour of the first Respondent for a sum of Rs. 25,000/- promising to pay the said amount on demand with interest. The Pro-note, however does not learn any date. The Appellant (Plaintiff) further stated that the first Respondent, in turn endorsed the said pro-note in favour of the Appellant. The first Respondent also executed an agreement on the same day standing guarantor of the second Respondent and promised inter-alia, that she would be jointly and severally liable for the outstanding amount due to the Appellant from the second Respondent. She also promised that the Appellant Bank at its discretion may realise the full dues from the Guarantor. In pursuance of the agreement, a Cash Credit Account was opened in the name of the second Respondent and he received the money by cheques. The Appellant Bank used to send statement of accounts to the second Respondent from time to time.
However, the second Respondent failed to repay the loan and a sum of Rs. 28,704.97 stood as debit a balance as on 30.1.73. This amount included principal, interest, insurance and other incidental charges. As the second Respondent failed to repay the amount, the Appellant Bank brought a suit (No. 114/73/10/74/13/74) against the Respondents. The amount was actually received by the second Respondent, but the suit was brought against both the Respondents, for recovery of Rs. 28,704.97. The second Respondent did not contest the suit, but the first Respondent entered appearance and filed written statement and contested the suit.
In her written statement, she totally denied the averments made in the plaint. She specifically denied that she stood as a guarantor of the second Respondent or executed any of documents or she was aware of any transaction between the Appellant and second Respondent. She also denied that she ever put her signature on any of the documents referred to.
On the pleadings, the trial court framed as many as 9 issues. During trial, the Appellant Bank examined 8 witnesses on their of all and the first Respondent examined herself as DW-1, Therefore, the second Subordinate Judge by his Judgment dated 23.3.76 decreed the suit exparte in favour of the second Respondent for recovery of Rs. 22,800/- alongwith interest and insurance charges etc. and dismissed the suit against the first Respondent. Hence this appeal.
In this appeal the main point raised by the Appellant is that the trial court erred in law by dismissing the suit against the first Respondent, who stood as a guarantor.
Mr. R.K. Sanajaoba Singh learned Counsel appears on behalf of the Appellant. None appears on behalf of any of the Respondents. Mr. Sanajaoba Singh submits that the trial court committed manifest error of law and facts by dismissing the suit against the first Respondent. Under the facts and circumstances of the case as well as under the provisions of law, the suit ought to have been decreed against the first Respondent also, in as much as, she stood as a Guarantor for repayment of the loan amount and in that respect the first Respondent executed the Agreement (Ext-A73) and endorsed the Promissory note (EXT-A/4) in favour of the Appellant bank. Therefore, under the facts and circumstances of the cases, the Appellant suit ought to have been decreed against both the Respondents.
While deciding the issue No. 4, the learned second Subordinate Judge found that the guarantor (first Respondent''s) name did not appear in the agreement (Ext-A/3). Similarly, in the Pro-note (Ext-A/4) also the signature of the first Respondent did not appear in right place. The learned second Subordinate Judge while deciding this issue observed thus:
... in the guarantor''s agreement, the name of the Defendant No. 2 does not appear as guarantor and Sri P.K. Mitter and A. Lakshmikumar Sarma (PW No. 2) clearly admit that nowhere the name of the Defendant No. 2 Thambal Devi appeared as guarantor in the body of guarantor''s agreement. Further in the guarantor''s agreement, the person who stood as such it is not synonymous with the name as of the Defendant No. 2 Thambal Devi. A Lakshmikumar Sarma (PW. 2) a Grade-I Officer of the Plaintiff who was present according to him and PW No. 1 at the time of execution of the guarantor''s agreement by the Defendant No. 2, clearly says that the name as given in the guarantor''s agreement as guarantor viz. Smt. Late Thambal Devi is not a Manipuri Meitei Name. On the other hand, I think the word "Late" may imply somewhat a tribal name. Not only this the word "Thangbal" differs greatly from the name of Defendant No. 2, Thambal.
The second Subordinate Judge further observed thus:
...mere proving the signature, of Defendant No. 2 Thambal Devi and report of the Examiner of the questioned documents to show that the signatures marked Ext. A/3-1 to Ext. A/3-8 and the signature marked Ext, A/4-3 appearing on promissory note are of the Defendant No. 2 are not sufficient to conclude that the Defendant No. 2 stood as guarantor for the dues of the Defendant No. 1 to the Plaintiff by endorsing a promissory note in favour of the Plaintiff bank and by executing guarantor''s agreement Ext. A/3.
Accordingly, the learned Second Subordinate Judge decided the issue in favour of the 1st Respondent dismissing the suit against her. However, the suit was decreed in favour of the 2nd Respondent.
I have perused the evidence of the witnesses as well as the agreement (Ext. A/3) executed by the first Respondent and the promissory note (Ext. A/4) executed by the second Respondent in favour of the first Respondent and in turn she endorsed in favour of the Appellant bank as claimed.
The first Respondent in her written statement and evidence totally denied the execution of any document and her signature on Ext. A/3 and Ext. A/4. Hand writing expert (PW-8) gave his opinion that the signature appeared in Ext. A/3 and A/4 belonged to the first Respondent. The other Appellant witnesses also categorically stated that the first Respondent put her signatures on Ext.A/3 and A/4 in their presence. There is however, nothing to disbelieve these evidence. Considering the evidence of the witnesses of the Appellant, it can said that the said documents were executed by the first Respondent. Now the moot question is whether on the basis of these documents the first Respondent can be held responsible and decree can be passed against her.
P.K. Mitter (PW-1) was working as Agent of the Appellant bank during the relevant time. In his evidence he stated that the second Respondent produced the first Respondent as guarantor of the second Respondent in respect of the said loan and she executed the agreement (Ext. A/3). He further stated that the first Respondent also executed a promissory note (Ext A/4) and was signed in his presence. Later on the said promissory note (Ext. A/4) was endorsed in favour of the Appellant bank by the first Respondent. He further stated that the said endorsement was made in his presence and Ext. A-4(3) was her signature. Ext. A/4 was the hand written endorsement of Mr. Lakshmikumar Sarma. He further stated that the contents of Ext. A/3 and Ext. A/4 were explained to the first Respondent by him and Lakshi Sarma before she put her signature. In cross examination this witness stated that he instructed the ledger keeper one K. John to fill in the blank portion of the agreement and he accordingly filled in the agreement.
A Lakshmikuma-Sanna (PW)-2) in his evidence stated that the second Respondent produced the first Respondent as a guarantor and she executed the agreement in his presence and the hand written portion of the agreement was filled in by K. John, who was transferred at the time of recording evidence from Manipur Ext. A/3-1 to Ext. A/3-7 were the signature of the first Respondent, which she put in his presence. Besides, the first Respondent endorsee the promissory note (Ext. A/4) in favour of the Appellant under her signature. The endorsement (Ext. A/4) was written by S. Babu, an officer, Gr-I of the Appellant Bank in his presence. The first Respondent also executed an undertaking (A/15) and this hand written portion was written by K. John. All these documents were executed by the first Respondent on the same day. In cross examination, this witness stated that the name of Smti. Late Thangbal Devi appealed in the first page of the guarantor''s agreement (Ext. A/3) was not a Manipuri name. Besides, he also admitted that the amount guaranteed was also not mentioned in the agreement.
Though the first Respondent specifically denied the execution of any agreement, but these witnesses slated that the first Respondent put her signature on Ext. A/3 and Ext. A/4 in their presence. The blank portion of the Ext. A/3 was filled by K. John, he was not examined on the ground that he was out of Manipur, However, there is no evidence to show that the Appellant bank made any endeavour to bring the said witness for recording his evidence, in support of their claim. On perusal of the Ext. A/3 it appears that tie agreement was filled in most mechanically by a person, who was not the executant of the agreement (A/3), the hand written portion run thus;
...I/We the undersigned have Smti. Late Thangbal Devi delivered to the said bank a promissory note dated for Rs. 25,000/- and interest payable on demand made by the borrower in favour of me/us and for sufficient consideration to me/us endorsed by me/us to the said bank or order (the said said promissory note being intended as a guarantee to me extent of Rs. and interest of the balance from time to time.
From a reading of the portion of Ext. A/3 quoted above, it appears that the first Respondent did not stand as a guarantor for any amount even if she actually executed the agreement. Therefore, on the basis of Ext-A/3 she cannot be held responsible, The learned Counsel for the Appellant Mr. Sanajaoba Singh straneously argues that even though the agreement is ignored the promissory note (Ext. A/4) was endorsed by the first Respondent and the Bank being a holder of the said promissory note, the first Respondent is liable to pay the amount.
The Ext. A/4 is a printed promissory note, which was said to be executed by the second Respondent for a sum of Rs. 25,000/- in favour of the first Respondent. On the back side of the Ext. A/4 me signature of the first Respondent appears and it was proved as me signature of the first Respondent there is an endorsement, which runs thus: ''Please pay to State Bank of India or order''. The first Respondent put her signature in Manipuri Script, but the endorsement was neatly written in English.
P.W. 1, Mr. P.K. Mitter in his evidence stated thus"...the said promissory note was endorsed by Thambal Devi in favour of the Bank under her signature. She made the said endorsement in my presence. Ext. A/4-3 is her signature. The hand written portion of Ext. A/4 is in the hand writing of Lakshi Sharma. The endorsement in English was also written by Lakshi Sharma
P.W. 2, Mr. A. Lakshmikumar Sarma in his deposition stated that-
...Ext. A/4 is a D.P. Note in favour of the Defendant No. 2, Thambal Devi, It is executed by the Defendant No. 1 for Rs. 25,000/-. This was filled by S. Babu Singh, Officer, Gr-I of our Bank in my presence. Ext. A/4-1 and Ext. A/4-2 are the signature of the Defendant No. 1, which he put in my presence. In Ext. A/4-2 he appended to his seal. Ext. A/4 was filled by K. John the clerk of our bank...
Again this witness stated that:
...the endorsement was written by S. Babu an Officer Gr-I of our Bank in my presence, Ext. A/4 is the endorsement...
From the evidences of the PWs 1 and 2 it appear that the first Respondent executed the under taking (Ext-D) in their presence and the hand written portion was filled in by K. John. These witnesses ''further stated that all the documents i.e. Exis. A/3, A/4, A/15 were executed on the same day i.e. on 20.3.70. By the Ext. A/3, the so called agreement, the first Respondent cannot be said to have stood as the guarantor for any amount which is apparent from the Ext. A/3 itself. The learned Counsel for the Appellant having found that by the Ext. A/3, the first Respondent did not stand as a guarantor for any amount, he heavily relies on the Ext, A/4, the promissory note. The learned Counsel straneously argues that this promissory note (Ext. A/4) was endorsed in favour of the Appellant, and the Appellant being the holder of the instrument has a right to get a decree in favour of the first Respondent also. Therefore, it is now necessary to see whether the Ext. A/4 which was executed by the second Respondent in favour of the first Respondent and in turn whether the first Respondent endorsed the said promissory note in favour of the Appellant. As admitted by the PW 1 and 2, this endorsement as not written by the first Respondent. PW-1 stated that the endorsement in English was written by Lakshmikumar Sarma (PW.2), but the PW-2 stated in his evidence that the endorsement was written by S. Babu, an Officer Grade-I of his Bank in his presence. Unfortunately the said S. Babu was not examined. Because of the contradictory statements of PWs 1 and 2, it is very doubtful whether this endorsement was written before the first Respondent put her signature on Ext. A/4. Therefore, I am not inclined to accept the endorsement made in favour of the Appellant as it is doubtful whether the endorsement was made before the first Respondent put her signature on the backside of Ext. A/4.
Section 15 of the Negotiable Instruments Act deals with the ''Indorsement.'' As per the said section when the maker of holder of a negotiable instrument signs the same otherwise then as such maker, for the purpose of negotiation, on the back or face thereof or on a slip of paper annexed thereto, or so signs for the same purpose a stamped paper intended to be completed as a negotiable instrument, he is said to endorse the name and is called the "indorser". The word "indorsement" means the writing of one''s name on the instrument or any paper attached to it with the clear intention of transferring the same thereby. An indorsement is usually made on the back of the instrument, but may be written on the face of the instrument. In order to constitute "Indorsement" the writing in question should contain a direction to pay the amount of the instrument to a specified person. The form of the assignment is immaterial, provided the intention to transfer is immaterial, provided the intention to transfer is clear. The intention must be gathered from the words used and not from evidence.
In P.V. Govindan Vs. Thavarayil Kinathi Narayanan and Others, , the Madras High Court held thus:
these words do not constitute and endorsement within the meaning of Section 16, Negotiable Instrument Act, because there is no direction to pay the amount of the instrument to a specified person, nor does it consist only of the signature of the endorser''s name, and it is not seriously contended that it is. Nor do the words in my opinion constitute an assignment. There are no words of assignment, nor do they convey an expression of intention to transfer. Mr. Nambiar very strongly relied upon the observations of Lord Me Naughten in 1905 AC 454 (5), which indicate that the form of the assignment is immaterial provided the intention must be gathered from the words used and not from evidence aliunde.
From the above decision, it is clear that in case of an endorsement there must be a clear indication to make the payment by the endorser to endorsee. Here, in the instant case, of course, the endorsement written in English gives a clear indication to make the payment to the Appellant, but writing of the endorsement being doubtful in view of the contradictory statements made by PWs 1 and 2 in their evidences, whether it was written before or after the signature of the first Respondent. It is very difficult to accept that the first Respondent endorsed the document in favour of the Appellant Bank. I hold that there was no assignment of the document in favour of the Appellant Bank. Therefore, the Appellant Bank did not require any title in respect of the pro-note (Ext. A/4) and that basis the Appellant Bank cannot get a decree against the first Respondent.
There is yet another facet of the case which may also be looked into. Even assuming there was a proper endorsement, whether on the basis of the such endorsement, the Appellant bank is entitled to sue the first Respondent on the strength of Ext.-A/4. The averments made in the plaint would clearly indicate that at the time of endorsement no consideration was passed.
Section 43 of the Negotiable Instruments Act provides that a negotiable instrument made, drawn, accepted, indorsed or transferred without consideration, or for a consideration which fails, creates no obligation of payment between the parties to the transaction. But if any such party has transferred the instrument with or without indorsement to a holder for consideration, such holder, and every subsequent holder deriving title from him, may recover the amount due on such instrument from the transferor for consideration or any prior party thereto. The section sets forth the circumstances in which, in suits on negotiable instruments, a plea of want or failure of consideration can be successfully setup and those in which it cannot plea of no consideration is not available where the rights of bonafide transferees are involved. As between immediate parties, that is, between the drawer and acceptor, between the payee and the drawer, between the payee and the maker of a note, between an indorser and his immediate indorser, the Defendant can successfully plead that no consideration moved from the Plaintiff to the Defendant, From the evidence of the Plaintiff''s witnesses it is clear that the first Respondent had signed the pro-note without any consideration.
In this regard, a decision of this Court may be referred to. In Jathmal Geneshmal Firm v. Haridas Roy and Ors. AIR (36) 1949 Ass 6, a Division Bench of this Court held that the instrument having been transferred the rights of the parties to the instrument were governed by Section 43, the holder in due course was entitled to recover the amount of the cheque. However, this aspect of the matter has not much importance in view of any decision that there was no proper endorsement by the first Respondent in favour of the Appellant - bank.
In view of the above, I hold that under the facts and circumstances of the case, the first Respondent cannot be held responsible for payment of the amount and, therefore, dismiss the appeal with costs to the first Respondent all through.